Chapter 14
Growth and Global Expansion
McGraw-Hill/Irwin
Service Management: Operations, Strategy, and
Information Technology, 6e
Copyright © 2008 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Learning Objectives
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Identify and differentiate the four domestic growth
and expansion strategies.
Discuss the nature of franchising from point of view
of the franchiser and the franchisee.
Differentiate between the three generic international
strategies.
Discuss the three factors to be considered in planning
transnational operations.
Discuss the five C’s that must be balanced in a
borderless world.
Identify and differentiate the five global service
strategies.
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Importance of Services in US
Consider May, 2008
 Goods balance of payments deficit is
$72.5 billion
 Services balance of payments surplus is
$12.7 billion
 Net deficit is $59.8 billion
Source: Bureau Economic Analysis, July 11, 2008
Expansion Strategies
Single Service
Single
Location
Multisite
Multiservice
Focused service:
* Dental practice
* Retail Store
* Family restaurant
Clustered service:
* Stanford University
* Mayo Clinic
* USAA Insurance
Focused network:
* Federal Express
* McDonald’s
* Red Roof Inns
Diversified network:
* Nations Bank
* American Express
* Accenture
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Franchising
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Benefits to the Franchisee
Management Training
Brand Name
National Advertising
Acquisition of Proven Business
Economics of Scale
Issues for the Franchisor
Franchisee Autonomy
Franchise Contract
Conflict Resolution
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Generic International
Strategies
High
Force
Towards
Global
Integration
Low
Global
Strategy
No
International
Strategy
Low
Transnational
Strategy
Multi-domestic
Strategy
High
Force Towards Local Responsiveness
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Multinational Development
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The Nature of the Borderless World (Triad)
Customers - information has empowered
Competitors - nothing stays proprietary
Company - fixed costs require large markets
Currency - become currency neutral
Country - deprive competitor of home market
Planning Transnational Operations
Cultural Transferability
Worker Norms
Host Government Policy
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International Strategic Service Vision
Service Delivery
System
Available technology?
Infrastructure?
Utility service?
Operating
Strategy
Service Concept
Appropriate managerial
practice?
Participative?
Autocratic?
What are customer
expectations?
Perception of value?
Service ethic?
Space availability?
Labor market institutions?
Government regulations?
Unions?
Service encounter?
Language?
Acceptance of self-serve?
Interaction with suppliers?
Host government policies?
What are the usage
patterns?
Educating customers?
Language?
Front office?
Back office?
Labor market norms and
customs?
Cultural transferability?
Target Market
Segments
What are the market
segments?
Domestic?
Multinational?
Tourist?
What are important cultural
differences?
Language?
Life style?
Disposable income?
What are the workforce
demographics?
Skills?
Age distribution?
Attitudes?
Work ethic?
14-8
Considerations in Selecting a
Global Service Strategy
Global Service Strategies
Globalization
Factors
Multicountry
Expansion
Importing
Customers
Follow Your
Customers
Service
Offshoring
Beating the
Clock
Customer
Contact
Train local
workers
Develop
foreign
customers
Customization
Specialize in
back- office
office service
components
Quality and
coordination
Information
Intensity
Usually a
standard
service
Usually
routine
Satellite
network
Develop foreign
language &
cultural sensitivity
skills
Strategic
opportunity
Strategic
opportunity
On site advantage
Cultural
Adaptation
Modify
service
Accommodate
foreign guests
Labor Intensity
Reduced
labor costs
Government
restrictions
Increased labor
costs
Logistics
management
Modify
operations
Move
experienced
managers
Could be
necessary to
achieve scale
Hire local
personnel
Inadequate
infrastructure
Provide
extended
hours of
service
More need for
reliability &
coordination
Time
compression
Exploit
opportunity
Complexity
Other
Re-prototype
locally
Opportunity for
focus
Training
investments
Cultural
understanding
Reduced labor
costs
Home office
employee
morale
Common
language
necessary
Reduced labor
costs
Capital
investments
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Topics for Discussion
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Recall that service operations can be classified as
processing people, goods, or information. What
challenges are faced in each category when
globalization is undertaken?
Chili’s, a U.S. – based restaurant chain that offers
Mexican food, has its largest establishment in
Monterrey, Mexico. Why is Chili’s so successful in
Monterrey?
What is the inherent conflict in a franchising
arrangement?
What explains the continuing trade surplus in
services for the United States?
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